Alan Collett

Some important tax legislation is on the way affecting those who transfer their pension funds into Australia. More details are here:

http://www.gomatilda.com/news/article.cfm?articleid=279

Best regards.

Wanderlust

Ok, I thought I had a firm grasp on the English language, and a few brain cells in my head, but that makes no sense to me at all. (should have paid more attention during accountancy classes)

A quick opinion please - is this good or bad news for those of us moving to Oz??

W.

Alan Collett

Hello W, and I like your reply ... :-))

It is good news if the proposed legislation makes it onto the Statute Book in that if you transfer a pension fund to Australia more than 6 months after you arrive to live in Australia (and there are usually good tax reasons for moving a pension fund to Australia - but that's another issue), the tax charge that results will not fall on you individually, but on the pension fund.

That's good news as:

1. The tax rate in an Australian superannuation fund is usually lower than that which you would pay personally, and

2. If you had to pay the tax bill personally you wouldn't be able to access the pension fund monies to pay the tax bill - hence my comment that the section 27CAA tax liability presently needs to be met out of already taxed income.

Hope this helps ....

Rudy

Hi Alan,

So does this legislation also affect Endowment policies in the same way? Or can you leave endowments in the UK with funds to cover them until they mature?

Sorry I am really confused, I guess thats why we need people like you!!

Hazel

Alan Collett

Hello Hazel.

No, this tax provision only affects pension transfers into Australia.

There are two separate tax provisions that affect many who are moving to Australia:

1. The Foreign Investment Fund Rules, which can affect you if you retain pension funds and certain types of investments such as PEPs/ISAs, endowment policies, etc when you move to Australia. These Rules are (so far as I know) unaffected by the proposed change to the tax legislation. Have a read of the tax factsheet attached to the news item on the Go Matilda site referred to above to get a better feel of the FIF issues.

2. Section 27CAA, which affects you if you transfer a pension fund into Australia, albeit with a 6 month window allowed by the ATO before they will consider you have a tax exposure - this is affected by the tax amendment. Section 27CAA only looks at pension transfers, not the transfer of other investments.

Capital gains tax is another issue which can affect those who have moved to Australia and who retain endowment policies, ISAs, etc through to maturity - the tax exemptions that apply to these investment products in the UK don't apply once you are tax resident in Australia.

Note also that the 6 month "window" only applies to section 27CAA (and it is an unofficial concession at that). There is no 6 month window on realising other capital gains, etc that might arise.

Hope this also helps.

tennisoz

Alan

My wife and me will both be eligible to draw lump sum and pension after 2004 from a teachers final salary scheme in Scotland. We will move to Oz after then.

What would be your recommendation out of the following:-

1 Draw lump sum in £'s and transfer them to Oz via Commonwealth Bank London to our Oz a/c and draw pension in £'s have it paid into UK bank and transferred to Oz account.

2 Wait until we move to Oz to draw both and arrange a transfer from there.

3 Something else I haven't thought of!

We can survive without lump sum and pension for a while in Oz so don't have to do anything hastily if this isn't to our advantage.

Any advice gratefully received!

TennisOz



Best regards. [/QUOTE]

Alan Collett

Hello TennisOz.

It would be unwise of me to give advice that is specific to you on a discussion forum. Indeed, if you understand the tax issues the next step is probably to speak with a financial planner in Australia who can look at your options in more detail.

If you would like my financial planning colleague in Australia to have an initial telephone discussion or email exchange with you please send me an email with your contact details so that he can advise you of how he can help, and his fees.

Best regards.



[/QUOTE]

Rudy

Thanks Alan,

Is the Capital Gains tax liability you mention, from the UK against your matured endowment or from the Australian side?

I will have a read of the fact sheet, but I do find it a confusing issue.

Hazel.

Alan Collett

It is an Australian tax issue Hazel.

Best regards.